Wednesday, 26 April 2017

Victory on Costs in Small Claims

One of the delights of losing a claim which has been dealt with in the county court under the small claims regime is that, if the winner was legally represented, you won't have to pay the legal costs they have incurred. There may be certain expenses you will have to be reimburse and for full details of them, the traps and how to handle a small claim, see my book Breaking Law. 

Is there any exception to this protection from a costs bill? Yes. You won't enjoy the protection if you have been guilty of unreasonable conduct. You might have deceived the court and the claimant into believing that you were defending the claim and then deliberately stayed away from the final hearing. Or you might have brought a hopeless claim and lied your head off when you got to court with some of the biggest whoppers the judge had ever heard. Whether the conduct was or was not unreasonable is going to depend on the circumstances of each individual case.

But the Court of Appeal * has just endorsed some guidance on how the question of unreasonable conduct should be approached which will apply where you have attended the final hearing and not lied until your head dropped off. Conduct will not be unreasonable simply because you lose. And it will not be unreasonable if a more cautious litigant would have acted differently. The acid test is whether the conduct complained of can be reasonably explained. If it can, then your conduct (for example, in pursuing a failed claim or defence) might be regarded as optimistic but it will not be unreasonable. The Court of Appeal went on to express the view that it would be unfortunate if litigants were too easily deterred from bringing or defending a small claim by the risk of being held to have behaved unreasonably and so rendering themselves liable for heavy costs.

In the case in question, the claimant had failed in a claim because of an obscure point of law which had gone against him. He then appealed  to a circuit judge and failed again but the circuit judge ordered him to pay the legal costs of the defendant which had been represented by lawyers, on the basis that he had been guilty of unreasonable conduct in pursuing the appeal. The Court of Appeal decided otherwise and quashed the order for costs. It was especially influenced by the fact that the circuit judge had actually given the claimant the necessary permission to make the appeal.

If you are making or pursuing a small claim and your opponent has lawyers, you may have heard from or you may be hearing from those lawyers to the effect that their client's legal costs amount to £40,000,000, accusing you of unreasonable conduct in the proceedings and threatening to ask the court to order you to pay those costs if, as they expect you do do, you lose. You might mention this latest Court of Appeal decision to them!

* The case name is Dammermann v Lanyon Bowdler LLP [2-17] EWCA Civ 269